The PSR Interchange Fee Cap: Why Your Card Costs Depend on Which Cards Your Customers Use

Every time a customer pays by card, a fee moves between banks before you see a penny. That fee is interchange, and it is the single largest variable in what your card processing actually costs.

The way interchange works, who caps it, and what falls outside the cap explains why two businesses can be with the same payment provider and see very different effective rates.

What interchange is and where it goes

When a customer pays by card at your business, the payment moves through two banks: the card issuer (the bank that gave the customer their card) and the acquiring bank (your payment processor). The acquiring bank pays a fee to the card issuer for every transaction. That fee is interchange.

You do not pay interchange directly. Your merchant service charge includes it, along with scheme fees paid to Visa or Mastercard, and the acquiring bank's own processing margin. But interchange is typically the largest of these three components, so changes to interchange rates change what you pay.

The question of how large that component is depends almost entirely on what type of card your customer used.

The cap and what it covers

The UK inherited its interchange fee rules from the EU Interchange Fee Regulation (IFR), which set caps that were retained in UK domestic law after Brexit. Under the current rules, the Payment Systems Regulator (PSR) oversees these caps in the UK.

Consumer debit cards are capped at 0.2% of the transaction value. Consumer credit cards are capped at 0.3%.

These caps apply per transaction. On a £50 sale, the cap means your acquirer pays no more than 10p in interchange to the card issuer on a debit transaction, or 15p on a credit transaction. That keeps the core cost predictable for businesses where most customers pay with standard personal cards.

The cap applies to cards issued to consumers in the UK. It does not apply to commercial cards.

What the cap does not cover

Commercial cards sit outside the cap entirely. A business debit or credit card, a corporate charge card, or a purchasing card carries no regulated maximum on interchange. The interchange rate on commercial cards is set by the card schemes and can be substantially higher than the consumer card rate.

This matters to you if your customers include other businesses. A plumber whose clients are mostly households will have a very different card cost profile to a trade supplier whose customers pay with company cards. Same card terminal, same payment provider, very different interchange exposure.

The gap between consumer and commercial interchange is not published in a single accessible place. It varies by card type, scheme, and the specific BIN (bank identification number) range of the card. Most businesses only see the effect of it when they look at their blended rate and find it higher than they expected based on the published consumer caps.

Three components, one rate

Interchange is one of three layers in your merchant service charge.

The first layer is interchange. This is capped for consumer cards, uncapped for commercial cards, and varies by card product even within those categories. Rewards cards typically carry higher interchange than basic consumer cards.

The second layer is scheme fees. These go to Visa, Mastercard, American Express, or whichever network processed the transaction. They are not capped by the PSR interchange rules and have risen over the past several years for some card types. The schemes publish their fee schedules, but the documents are detailed and the costs vary by transaction type.

The third layer is your acquirer's margin. This is what the processing company charges for operating the infrastructure, managing risk, and providing your account. It is the component you have the most direct ability to negotiate.

Most payment providers offer either blended pricing or interchange-plus pricing. Under blended pricing, all three layers are merged into a single percentage rate. Under interchange-plus, you see the actual interchange passed through at cost, plus a separately stated scheme fee, plus a fixed acquirer margin.

Blended pricing is simpler to read. Interchange-plus is more transparent and typically lower-cost for businesses with significant card volume, because you pay actual interchange rather than a blended average that often includes a buffer.

What your statement should show

If you are on interchange-plus pricing, request a monthly statement that breaks out interchange, scheme fees, and acquirer margin per transaction type. Some processors provide this automatically; others require a formal request.

If you are on blended pricing, you will not see these components split out. What you can do is request a breakdown of your transactions by card type. Knowing the percentage of your volume that is consumer debit, consumer credit, and commercial card gives you a clearer picture of your actual interchange exposure.

If a significant share of your transactions is commercial card, that explains a higher blended rate even when consumer card interchange is capped. It is not a pricing error by your processor. It is the structural result of commercial cards sitting outside the regulatory framework.

What the PSR does and how to check current rules

The PSR is the UK's payment system regulator. It sets and reviews the rules governing interchange and other aspects of card payment infrastructure. Interchange caps can be subject to review, consultation, and revision.

For the most current fee caps and any changes to the regulatory framework, check the PSR's published guidance at psr.org.uk. Rules effective at the time this article was written reflect the current retained EU framework, but the PSR has consulted on aspects of the regime and further changes are possible.

If your business is considering a significant investment in payment infrastructure or a long-term contract with a payment provider, understanding the current regulatory position and any forthcoming consultations is part of doing that properly.

Before you sign anything

If you are comparing payment providers, ask each one to provide a cost breakdown that shows interchange separately. Ask what pricing model they offer, whether you can switch between blended and interchange-plus, and what the effective rate has been for businesses with a similar card mix to yours.

A rate that looks lower at a headline level can cost more once commercial card interchange is factored in. The comparison only makes sense when you are looking at the same underlying structure.

We work with UK businesses across hospitality, retail, and trades to review their card processing costs against what is actually available in the market. If you want an independent assessment of your merchant statement, we can provide one.